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DOJ clears United-Continental merger on slot transfer to Southwest

The U.S. Department of Justice cleared the way for United and Continental airlines to merge Friday, after the two carriers agreed to transfer slots at Newark Liberty Airport to Southwest Airlines.

United and Continental said they are on track to merge by Oct. 1, although state attorneys general continue to investigate the deal.

“The proposed merger would combine the airlines’ largely complementary networks, which would result in overlap on a limited number of routes where United and Continental offer competing nonstop service,” the DOJ said.

The largest such routes are between United’s hub airports and Continental’s hub at Newark airport, where Continental has a high share of service and where there is limited availability of slots, making entry by other airlines particularly difficult. The transfer of slots and other assets at Newark to Southwest, a low-cost carrier that currently has only limited service in the New York metropolitan area and no Newark service, resolves the department’s principal competition concerns and will likely significantly benefit consumers on overlap routes as well as on many other routes. The slot transfer is through a lease that permanently conveys to Southwest all of Continental’s rights in the assets, in compliance with FAA rules.

United and Continental announced earlier in the day that they had reached agreements to lease 18 pairs of take-off and landing slots during peak and off-peak travel times, and certain related facilities at Newark to Southwest to address DOJ concerns.

“We think this would be a fair solution that would allow Continental and United to create an airline that will provide customers with an unparalleled global network and top quality products and services, while enhancing domestic competition at Newark,” Jeff Smisek, Continental’s chairman, president and chief executive officer said in a news release.

Continental and United currently operate 442 daily roundtrip flights into and out of Newark. The leasing of the first of the 18 daily slot pairs is set to start in late March 2011, with all of the slots leased by June 2011.

The Justice Department said it supported efforts of the attorneys general of Ohio, California, Ohio, Texas, Virginia, Pennsylvania, North Dakota, New Jersey, Hawaii and the District of Columbia to have any additional concerns about the proposed merger addressed.

Ohio Attorney General Richard Cordray, who is leading that effort, said:

Although today’s announcement of concessions by Continental relating to the Newark airport is a positive step for consumers nationwide, the multistate review of the proposed merger will continue. The states are not yet satisfied that the economic interests of our regions are protected adequately in the proposal as it stands today. We will continue our current investigation to ensure that state antitrust laws are not violated and that the economy in Ohio and other affected states will not suffer unnecessarily from the proposed merger. I am pleased that the merging parties have directly expressed to me their commitment to continue working cooperatively with the states as we proceed with our review.

Responding in a statement to the DOJ’s clearance, Smisek said:

The completion of DOJ’s review is an important step on our journey of creating the world’s leading airline, benefiting our customers, co-workers, communities and stockholders. The DOJ’s decision permits us to clear one of the last regulatory hurdles to closing our merger.

We are pleased to have achieved this critical milestone and look forward to our respective stockholders’ votes next month, following which we expect to be on track to close our merger by October 1st. The combination of United and Continental will create a world class airline, which will deliver an industry leading network for our customers and the communities we serve, career opportunities for our people, and value and return for our stockholders.

Note: This is a seattlepi.com reader blog. It is not written or edited by the P-I. The authors are solely responsible for content. E-mail us at newmedia@seattlepi.com if you consider a post inappropriate.